California Governor Signs Bill That May Raise HOA Fees as Part of Major Housing Reform Package

California Gov. Gavin Newsom has inked a series of bills to help California construct more starter homes and cut down on the cost of housing.

Among the other bills Newsom signed at the end of the legislative session this week, he approved Assembly Bill 2050, which requires homeowners associations to maintain a minimum reserve contribution. That could improve safety and cut down on surprise assessments, but it may also increase HOA fees for millions of California homeowners.

He also signed off on some, but not all, reforms sought by lawmakers after the Palisades and Eaton fires of January 2025, the most destructive in the state's history.

In all, Newsom signed a package of over 30 housing bills aimed at reducing regulatory requirements to make it easier to build homes in the state. The package includes reforms that cut down on the number of reviews projects must go through and new standards for factory-built housing.

The slate of bills also includes measures that advance redevelopments at the former Concord Naval Weapons Station and the Sports Arena site in San Diego, which between them promise 14,250 homes.

"Every Californian deserves a fair shot at a stable home—families shouldn’t have to wait years for housing to be approved and built in their communities," Newsom said in a statement. "That means continuing to push forward with smart, practical solutions that open more doors for families and strengthen communities across our state."

California scored an F on the Realtor.com® State-by-State Housing Report Card. Newsom has pushed for more home construction to improve the state's affordability. And he's taken a harder line against cities that have blocked affordable housing development.

Homebuilding reforms

Another set of new housing laws is aimed at encouraging construction of more starter homes. SB-1116 modifies some existing laws about building height and density requirements. That could remove some zoning and other barriers that block small-home construction.

The pro-development group California YIMBY said that also could diversify the housing stock, especially condominium construction, which has largely dried up.

“Many of California’s most cherished historic neighborhoods feature townhomes, bungalow courts, and other smaller, more affordable homes,” Brian Hanlon, CEO of California YIMBY, said in a statement. “Decades ago, most cities zoned affordable homeownership out of existence, and now homeownership is at a near 4-decade low."

A related effort includes reforms to manufactured housing. Off-site construction advocates say that a range of techniques, such as off-site pre-fabrication and modular homes, could allow homes to be constructed in less expensive ways. But the wide range of zoning requirements across local governments make it a challenge to build at scale.

Newsom signed several laws that provide more consistent building code treatment for manufactured housing. It also streamlines factory-built housing inspections and fees and also improves how state affordable housing programs treat the construction type.

However, Newsom vetoed AB 2166, which would have created a new California Housing Finance Agency to offer state-backed credit backstops to surety companies. That could have provided a financial backstop to the business, but cause the state to assume some of its market risks.

The bills come as California is already wrangling with compliance with Senate Bill 79, which mandates cities plan for more housing development by adopting a housing element. The state has taken a pro-building approach to confront its historic housing affordability crisis. But a number of cities have delayed rollouts, and others were hit with lawsuits.

Newsom approves some, not all, wildfire reforms

At the same time, Newsom signed several bills related to property insurance, continued fallout from the devastating wildfires from last year.

SB-876 would have added new requirements for insurers to handle claims more quickly in a declared emergency. It would also increase penalties for violations of fair claims practices. SB-1301 adds requirements for insurers when they don't renew a homeowner's policy.

Newsom also signed a spate of bills related to fire insurance. He already signed several bills earlier in the month related to smoke damage claims.

The state's home insurance crisis is especially acute as thousands of homes are at high wildfire risk. Increasingly damaging wildfires brought over $22.4 billion in claims in 2024. The state is investigating two insurers, alleging they systematically delayed and underpaid claims. One of theme, State Farm, has called the state's insurance marketplace "dysfunctional."

Newsom vetoed two bills, though. SB-877 was aimed at speeding the times for insurers to provide documents related to claims. SB-878 requires those insurers to provide compliance data on their payouts, starting in 2028.

Joy Chen, a former L.A. deputy mayor who's executive director of a group of wildfire survivors who have organized, said in an email the vetoes "leave every California family who depends on insurance more vulnerable to the same practices that have kept L.A. fire survivors from rebuilding our homes and lives."

She said groups would try to bring more reforms in the next legislative session.